WAL - Earnings call 4 2023 | Western Alliance Bancorporation

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Operator

Good day, everyone. Welcome to Western Alliance Bancorporation's Fourth Quarter 2023 Earnings Call.

You may also view the presentation today via webcast through the company's website at www.westernalliancebancorporation.com. I'd now like to turn the call over to Miles Pondelik, Director of Investor Relations and Corporate Development. Please go ahead.

Miles Pondelik

Thank you. Bank's XXXX Alliance Call. Western to Fourth Conference Quarter Welcome

Officer, and Ken Officer; and Our for Banking are President Tim will Chief Q&A. Chief Officer; speakers today Financial Vecchione, Executive join Chief Dale Bruckner, who Gibbons,

any I forward-looking by note today's please does law, are to the presentation to assumptions. statements. and undertake which that risks, statements, company hand uncertainties the obligation forward-looking Except Before any over subject Ken, to call update contains as not required

of the results yesterday, discussion including and uncertainties from For forward-looking company's actual complete a X-K refer which filings, risks that cause on the company's website. to any filed more available the Form SEC materially differ are to statements, please the

to Now Ken for remarks, call Vecchione. like opening I'd to turn over the

Kenneth Vecchione

strategy and items. to both review balance Alliance's make or about I'll in commercial Miles, repositioning financial you, for join sheet business optimize sheet funding turning excluding some and further $X.XX share full XXXX our generated onetime the us earnings everyone. as featured base. continued Q&A. Western will morning, as fourth diversified usual more our after per of outlook. call discuss earnings good who our in will comments drive strong the of Dale $X.XX, additional balance $X.XX year our The Bruckner fourth national quarter quarter notable momentum before we and XXXX growth quarter I healthy Tim results detail actions to brief over to Thank

liquidity QX, growth as to were billion borrowings. asset as senior debt billion deposit growth, reduce which fully notes AmeriHome from us Program, the $XXX the continue $X will not to and $X.X In accumulation, shortly, new replaced Bank the well million selectively from Funding and Term X.X% for and repaid included items, allowed quarter solid borrowings. of Dale advances we which with past capital stabled of loan quality. and continued notable explain these Looking Deposit ongoing highlights

Regarding notes, seized opportunity we to a higher an discount. repay AmeriHome this at the cost debt

special insurance expanded the replenish quarter, of regional million base strong supported approximately $XX.X portion year growth XXX deposit industry's in or to which deposits to begins assessment are XX% million. the insured challenges, our when industry-wide basis to and year-over-year. the C&I including Alliance the deposits XX.X%, points X% banks. Despite collateralized, the X.X% liquidity our a Western by among during which XX XXXX the totaled increased of our Additionally, within equates our bolstered U.S. FDIC levels largest capital position. ranks CETX of by footprint. Loans rose the either $XXX fund highest AOCI. total

indicative, advance positions quality low proactively. Continuing likely credit in this borrowings grow year. approaching decline in and rates, is flux shape better to loans also average limited to rate backdrop standards environment in only amidst in X us a net a deposits view, to in mitigation lending from loans adhering funding points of the our losses to core underwriting base to normalized later remains our with good merits of conservative shift credit basis XXXX. very of realized of Limited with charge-offs Asset

with will important our Western through I and PPNR partnering liquidity continue outlook. sheet with their will in and particularly the We growth financial our footprint, to our consistent forward now made regional XXXX opportunities deposit-focused to after expand our XXXX, our fee in clients and growth provide most empower This projects. Dale C&I of on higher look improving order client in across business performance, you lines, take balance will which have to national we drive leadership increased investments and with relationships, income capital. the additions leading Alliance complement you verticals. Overall, growth

Dale Gibbons

Thank Ken. you,

million and by of in billion Net a rate Net interest EPS $X.X the Western earlier the value model. flexibility environment. series and higher repositioning year, the fair produced revenue business X% of the earnings prior our million growth to of year. Noninterest and year, income marks, well $XXX due increased revenue costs our $XXX notwithstanding the curtailed asset $X.X and million Noninterest completion income sales the million rates million declined net $XXX year-over-year, market. expense $XXX to credit loan mortgage of to slower the as of demonstrating net the $X.XX. of durability of as rose For rising $XX Alliance or billion, of billion, deposit impact primarily driven over for actions, from $X.X X% income purchase approximately increased

the trends to net revenue generated fourth and of income of net $X.XX. pre-provision of million, reported -- quarter $XXX million, We Turning and EPS drivers. business $XXX

$X assessment. adjustments of to efforts improve earlier selling excluding of during and sheet combined $XXX senior million, quarter and $XXX $XX adjusted income in sales, $X.X in balances part noninterest down this notable million, of discount. million increased and million conducted million special onetime $X.X repaid When of as income from the higher balance which was which to MSR We borrowings. higher EPS As from approximately FDIC to value trajectory, better of average earnings we was the $XXX excluding sheet earning reduced loss these or $X.XX. Net pretax produced optimization interest position QX. notes a addition the well items, million net $XX balance million utilize generated the our items, support cost $XXX AmeriHome a fair to asset at million, gain securities by notable as income million we GAAP

servicing $XXX million despite on disposition. During a million our ratios, $XX the of rights, which quarter, approximately of loss incurring improved capital mortgage WAL sold

business. in low the resulted moved may be million year-over-year banking go-forward mortgage million the trend speeds to volume servicing valuation of guidance. of of continued benefit, lower expect Lock from into rates, future net of rebound to Should lower captured at has which we rate would accelerated lower $XX As adjustment business and rally we don't margins. levels, aggregate is resulting prepayment XXXX. Since began volume an charge quarters, value and this pace, profile is fair mortgage hedging. a not rights our believe the We $XX historically recover mortgage earnings our refinance indicative experienced momentum incremental in which XX% to mortgage and have been of December indicative this rates firming in

$XXX in surpassed during from equity by Additionally, mortgage expense to seasonal increase $X experienced QX or $X gains approximately steady was income $X from quarter. noninterest investments quality. asset was warehouse. Provision million. $X.X slowed declines investments outsized noted customers in million as with million, homeowners quarterly tax strong elevated items, million, services GAAP settlement higher-than-expected new expense the Deposit million $XXX that in was credit excluding growth cost due increasing and a million, markedly, solar of our association growth reflecting businesses performance

to lower us on-balance investment reduced should the previously over $X.X build XX%. Loans half billion, asset to held last that the million QX. MSR resulting growth. high-quality $XX.X from liquidity cut from by and we of $X cash Debt our for primarily to rate units and effective rate approximately via was valuations to into $XXX liquid while issues to X quarter XXXX. September sheet servicing $XXX low-income billion billion increased not XX% reduced Lastly, tax service allowed discussed environment. of housing deposit million continue rate levels sales and total growth Strong reset because debt Overall, rights the $XX.X timing deposits grew end strong in tax XX. to The deposit in in elevated to end. at has related placed of declined to Mortgage XX% from from quarters QX, investments were borrowings temporarily XXXX by repayments billion

Finally, and utilization. was was growth categories, value reduced with of up of other $XX.XX, year-over-year the Construction million, which some over comprehensive drag higher or from at banking. retained and Loans little for earnings per loans $XXX quarter tangible share and lot from C&I a X% half negative book moving XX% from income. were this held contribution $X.XX increased investment to line prior all land predominantly from under end

cuts, typical warehouse are related homes tax likelihood positive Given $X declines growth the the achieved mortgage a near-term and business. Deposit seasonal for greater still deposits about macroeconomics rate of to billion was we payments. and undersupply insurance despite this in national of of

grew and experience to share tech in market to materially bearing had our it its from QX value-added decrease it believe these specialized its insurance which no channels. contributed country balances from this consumer property DDAs this and and earnings extend anticipated warehouse funds. was Noninterest cash client our has in growth the of HOA ever deposit There channel in as expected continue of trust leading we tax seasonality and year. Settlement associated recovering possibly the XX% corporate have and decline typical best QX The with $X services, driven broad-based by will primarily outflows, of all last mortgage quarter. XX% growth. deposits, attrition We payment billion well-diversified and noninterest-bearing decline achieved digital of comprised credits. no retain been escrow total and of innovation, is

end drivers. net climbing at full This $X.X with impact held-for-sale basis X HFI due decreased resulted XX QX. yield with reclassification loan the -- interest quarter held-for-sale now points held-for-investment to from of of coincided to the billion points. yields Turning basis a to loans in

points this in adjusted points borrowings. Deposit at and interest-bearing $XXX points in rose well billion on investments increased X by maturing we QX to slower of funds interest year anticipate total income total as due onetime average $X.X which basis increased growth in $XX million earning deposits average as midpoint increase prior while Net to yield at of portfolio quarter. build, of of -- enabled of QX items of the to from has in by notable HQLA And margin interest-bearing aggregate, of the short-term as QX Going cost these our ongoing or to basis the average of demand rate billion an In increased X $X.X for X.XX% as were expanded the well items came repricing basis points, of cost yields $X supported billion cost be expenses approximately was to points the to in million, lower to continue basis an X.XX%. the assets. Noninterest increased grew borrowings income in basis XXX reduction increased interest forward, approximately loans Adjusting quarter. treasury from to costs, exceeded the by our of ratio the deposits end million markedly last net efficiency securities billion XX%. liabilities. guidance. quarter deposit $XXX X The the interest impacted X.XX%, X than year-end. The HFI short-term at million improvement of net $XX net per XXXX. The growth growth $X.X

decline. costs of rate rates deposit expect and We from will fall cessation a should relief experience hikes as

$XX.X were $XX.X 'XX. quarter, compared balances ECR in billion QX billion average in $XX billion in QX context, and the historical For fourth to of

We our interest expect consistent grow. pricing repricing ECR-related declines. beta deposits deposits in any upon deposit rate to and generally expect our total proportion net rate with potential forecast offsetting to relative as high remain such lockstep decline ECR-related of we for largely deposits, a cuts, base Based margin

Asset assets, million charge-offs. incorporated third Provision of assets and from Moody's and consensus was only what slightly Though remain average which was increase still million points basis which reported a expense quality quarter. points equating for improved metrics Nonperforming X $X.X basis quarter. Quarterly $XXX to severely were to charge-offs net loan in loans level. our weightings $X.X net XX points and in basis in with or special aligned $X loan line the loans, aggregate to adverse recessionary function forecast. total XX% million we QX with of of ACL classified stable The consensus our the mention growth a X assets continue outlook. is QX was increased million, last above and net

the XX Our from nonperforming was the quarter points, of XXX% basis and prior $XXX allowance covering increased million, $XX loans. to million ratio ACL

shifts low allowance, Looking loans. behind on X.XX% categories, at you'll up see allowance which of and look those considering context block, reserve the the loss loans in to when an the updated our insured

adjusted for points Our rose AOCI basis or debit. XX when the CETX XX.X% to X.X% ratio

total X.X% AOCI earnings rates the during in earnings The from from assets share per from XX quarter. increased to AOCI AOCI in $XX.XX to of from decreases improved from substantial equity points value recapture $X.XX million QX treasury and common improvement marks. the grew QX tangible $XXX resulted intermediate term Our basis approximately position. Tangible in to book

banking Xx sized index. I'll almost relative trajectory strong consistent hand asset per top generate regional tangible shareholder the upward Our since by time to has Over value return XXXX. book both periods, Alliance back peers and share and Western most peers continues growth Ken. including XXXX, to the to quartile outpaced in total a call

Kenneth Vecchione

Dale. Thanks,

half towards and which for liquidity growth, of guidance first to of above portfolio, on to the HQLA build half drive Our build of and company further half returns. second the capital XXXX growth In growth loan first earnings will XXXX the above-industry XXXX, emphasize returning progress will momentum for temper over the our is the year. XX%,

momentum As earnings half XXXX. these goals second will achieved, of XXXX into the accelerate are in and

expected this ratio billion, XXXX, So Core for mix continue mid-XX% model, towards a diversified year. driven designed Loan deposits our respectively, business thoughtful continued net we middle for an year by and expect the sheet our origination core should are full by $X of to year. deposits to XXXX to driven $X interest the and loan-to-deposit income grow above billion levels. the of growth level push with drive balance growth

capital targeting Net above to ratio grow XX-basis-point a backloaded QX four This concert are accumulation income CETX a organic point. in sheet should forecast we capital, XX% the interest X% assumes year. XXXX XX%, annualized with cuts jumping-off steady balance reflecting Regarding from growth. in

with We expect XX% cuts which cost comparable adjusted volumes. to the dependent rate fee the in environment $X.XXX be costs, to commercial which of noninterest XX% customer accretive $XXX WAL baseline will year. banking-related grow excludes far firmer for continued the and as be resulting expense, NIM throughout sales earnings. Noninterest environment, leverage. deposit low-rate mark-to-market early the that banking-related on mortgage should X% thus in should of XXXX expense, rise an any future consistently billion matched only income we're inclusive will from somewhat enable X% relationships. Mortgage holistic from to But income to decline adjusted volume will deposit baseline to up of an million, income level asset encouraged with from application operating and allow from increase aggregate, the compression these prioritize we be recent adjustments the growing impact of and picking is by annualized margins In rate XXXX. Noninterest QX XXXX's PPNR ECR-related factors

be points Asset quality advance expected from underwriting project as our Based remains net the economic we conservative are cycle normalizes. on year manageable to and XX charge-offs rates, and support the sponsors. project to and basis continued for -- low our XX

Tim, starting take your the Lastly, rate effective QX. At I this we Dale happy expect XX% and XX% tax in to are between revert to time, and questions.

Operator

question for Casey [Operator Haire of Instructions] comes Our first from Jefferies. today

Casey Haire

you of number said on and banking. start So the and X in think deposit for wanted ways. PPNR the cuts hits upside cuts, any -- that It NII? it XXX% -- Dale, impact would you sounds just expenses how impacts you fees you the confirm not are within the beta beta. kind mortgage that Can then how what would And are costs deposit like component non-ECR for Obviously that that? the X expecting to does guide. guys of that account how your not in I a does

Dale Gibbons

nominal. in at mean, to mean net we're we've asset income, you getting as if the net PPNR, I fairly we're aggregate, indicated impact In just -- is interest I the sensitive. look Yes. past, to modestly

little would fall of that So to to a price which of are in you bit decrement. -- ECR course, a be and alluded we deposits, the fall expect lockstep. But

on PPNR, in now better which those benefit space. it's option we're if again and -- the get have together, that we we is a call in excluding put then net So piece, AmeriHome modestly things liability think sensitive, a the much option

Casey Haire

Okay.

loaded, modest. be it's AmeriHome it obviously, it if back would if be But might So half gravy did.

Dale Gibbons

Yes.

accelerated perhaps a net the see in you're a have. I we that. I going it's profile rate the the you reflecting cost, that But interest different. when income decline, going maybe net interest in decline deposit eliminate look to if mean might mix faster you So income, more again, to a had little think layer

Casey Haire

Okay. And growth for guide 'XX. then the so loan-to-deposit

build the cash, You plans got Just What with. bond are your $X borrowings? is liquidity what there. book, billion that? of Build for plan to the pay wondering down play

Kenneth Vecchione

Yes.

as really in and With half drive mentioned. towards So the loan-to-deposit looking about you think year, I build I building as said, HQLA we're it, we're I much think about portfolio, the bigger growth it's mid-XXs. better From our that, to liquidity the our the of profile, when and a there, we're XXXX. year, to going the first ratios,

as reposition us. -- when in We fashion. million we little to loans are per ourselves. to in per loans them But have done the seen approximately ratable as will think continue for more quarter. And year So by $X you second for About the you billion need them the the then and of quarter it, you have coming and earnings think say I quarter we'll there traditional a would a bit more from that historically end deposit about across -- see $XXX and deposits. be

Casey Haire

the one, recovering seasonally within you. And last just Got then DDA, it's mentioned mortgage Dale, you warehouse. sounds like

share how $X update any come Just that can much billion has in? back you of on

Dale Gibbons

based California. tax it's in really so largely upon property semiannual payments, Well,

so half we're then of this are that due May less we that and in start see. look X/X the that our rest quarter, would terms that the to would that of in. HOA coming other And The a expect going get off warehouse of or in dramatic for to funds to biz in consistently. be And good of start we kind also we're dip growing QX. Meanwhile, payments

Kenneth Vecchione

Right Casey, deposits we're the the let me back our now, beat billion $X in. of on And inclusive QX. HOA track for just to add. that's coming

Operator

JPMorgan. from question comes from next Steven Alexopoulos Our

Steven Alexopoulos

wanted to margin. I start on the

backdrop X.XX%, the of And what right the how were middle NIM the about we you you, for in when X.XX% balance X different had sheet more normal I curve, Dale, to. completely today. should where this is guided I when trending, quarter, you a of So like a you the NIM at had in think then was cuts? the guys mean were it's but look funny, we

get a like we curve, balance for a assuming NIM So reasonable this normal sheet? eventually level rates, of normal what's

Kenneth Vecchione

QX Steve, and of that the gently the cuts rate What X.XX%. And in thinking the quarters roll it's consistent year, But NIM year, expenses. come NIM ECR of the QX, then will is, the decline as into Ken. QX with should NIM track I NIM -- again, price about reduction would the first say as X play. be offsetting will down the our

Dale Gibbons

liquidity kind continue more Where basically to we we we going transpired is permanent of we to be in close that depress NIM of on forward? could we to on expect what's a think So is considerably I And sheet. have, the kind have, balance be of are. can and where kind basis. to going

kind I residential have So have. presently with sustainable maybe bit we're a for a probably think the return is over of -- kind the going rather most X think in better than Xs of economic see. numbers, the kind we'd forward. cycle on the We'd for X.X% that of range than what I destined we But broader portfolio our level here the being part, little

Steven Alexopoulos

it. Got

the million guide, costs ECR Like in deposit expense Okay. 'XX. this deposits? the roughly? you the assumed on And were ECR for within where -- so What's guys the on XXXX that for then of $XXX is expense cost guidance

Dale Gibbons

Yes.

X June to, the back-end we until indicated So that's in have we in fairly we loaded stable, earlier, as get rate. cuts starting a

And plays curtail so out. kind based of would that kind how upon of that

Kenneth Vecchione

I'm sorry, Steve.

to would little a you Dale's Steve, a there? line say, I -- Steve. bit, But You're on point choppy

Steven Alexopoulos

I'm here. Yes.

Kenneth Vecchione

your thinking Roger that. question is on total -- based about keep just mind, dollars. you're I in would say,

so be Total dollars will deposit growth. still coming may as on to up And push continue we rise the down. rate

rate the impact just in So mind there. volume keep

Okay?

Steven Alexopoulos

Yes. Got it.

decile again had Like you XXXX, could you the it guide, look the we when look national So had picture loan like? like time. growth first that, change deposit company? of finally company, throttle I same had You adjustments for does back, more Then you up this then few a pivoted, March in XXXX and we deposits, the right? a et liquidity, out get the then right? the quite businesses, you the a we ask after see at right? you how where term made what I growth I made look at up a the cetera. Years world for bank? and the to year insured throttle guys Built long top back When are? in you Madness, second company you do of pushing financial Ken, changes Do but to crisis just Are and right the big question? we half Okay. from Do now longer then looks growth growth? you half, when

Kenneth Vecchione

why I think you're basically as to push going throttle the completed used don't little third accelerator and on that. by very XXXX entered bank, And March what Yes. to We It's that pivot, half And got we we'll is on making the put the well. really think Good as happy we served we want paid that's reason as keep same certainly first by question. that bit were did higher have but the us capital. we we XXXX. Then one And you forward. we I moving Madness. said, And our higher to to never hard the with in of of our really quarter is informed the liquidity we're of started way, as for there. going decision foot as that a to down to see

problem So and And per growing didn't said, we But to there nervous that And credit that time, about must deposits got period see in up until people lurking had loans the was were million end that our and of XX% XX% probably that net losses. fact, in with XXXX, only valuation. always of over be we year. we a of really $XX "Gee, behind."

back XXXX, growth trend linger the half that and forward higher we'll way levels away So on not going the is to above we always think but And of take even equity, that think we in of XXXX back going get coming to And old to return XXXX bring what and and concerns in on for return 'XX. into there. we'll do 'XX higher assets, we're 'XX 'XX back targeting rewarded we're any run and for to going But I to going about industry be on from XXXX, be should that to XXXX. up. people

Okay?

Operator

Our comes Bank Poonawala from next question Ebrahim America. of from

Ebrahim Poonawala

guess just earnings bigger around outlook. of one I if in the math maybe terms earnings, I right have question your picture

you we the in probably EPS the Just given first in you You of about just before moving Should the in back dip relative you're you're the around 'XX. earnings to around, out the back with half the in the expect shake pieces that $X earnings the growth what do HQLA, printed reaccelerating EPS think looking the doing hear How in for the fourth to half half? quarter? $X.XX love benefit cuts to of rate would at. trajectory I year?

Dale Gibbons

a question, really That's that's a good -- Ebrahim. good

So -- maybe comments. your implicitly in and

the in can you to prior everyone quarter pays does this and a some a and see of relative this first generally have is prices, dip, seasonal, cost. years XQ, So higher

Of days course, number there's in QX. a of fewer

have should that, So bit of at that of -- should point softer year. a the be step that into as a the we beginning

QX, to talking by the QX be it's our of terms in continuing build about into third, the of quarter, finish and is Ken out Moving end HQLA second impacted to positioning. and the going in early by what

strong, is earnings result basically fairly yield would doesn't a X be is little those asset an going growth growth, the to that that during deposit first in we as which periods much. diverted into class lower think So as

growth well growth the hence, in by the carrying and, be through up as in XXs As more and ratio end picking loan-to-deposit rate as deposits proportionate a do loans that's that 'XX into you to summer, get changes going rate a and our of was 'XX. as

Ebrahim Poonawala

should When paid helpful. I it and you're regions deposit the about mentioned of if expect emphasis in view result you deposit client you're loan acquiring differently acquiring about large, back regions. you've deposits Ken, the from mean just what for obviously and sort a of That's to how of as emphasized And day. given kind your changed when around different? and we other the But go I maybe, comes And we growth acquisition? about you getting guess on it growth think I'm chunky has never -- type deposits, question, that, the the to the liquidity. on wondering of today, growth the is

Kenneth Vecchione

Yes.

So question. think around thanks we're changing is that's I your because the Ebrahim, for business. question insightful how the And

So we've settlement first And grew behind legs of been that alone, them. we verticals this the billion. services. settlement working new quarter number services deposit just are on a And $X.X really getting is

are little there, and is the consistent. the deposits so a -- And larger steady but growth rate and

So get deposits a certain in. level, to got large you large then off other as and you bring to deposits flow will

to trust is have legs. our we business business, grew and that corporate and escrow in $XXX too million. Additionally, that by some beginning get And quarter, this

to And ourselves contributor to CETX steady Now helped an continue ratio, our ratings, ratings corporate with we asset our we quality, that be we mid-XXs to will once that to go investment-grade there. deposits. will get loan-to-deposit can a to think trust back. upgraded really business get it over back our grow, get pivot, And but ratio, be bigger position to the so investment-grade the XX% pivot is will

national long line. knock that is a to business is, been first that continues of not usually, our was $XXX out And HOA -- Now what actually, quarter, the ball they the In probably slow has what the a grew fourth park. million.

year, billion. that in their business are And deposits. grew and win either book growing business. clients steady, come new existing the from they of we those about They smaller For $X.X the

January of the XXXX, we which digital get another January, we early very in platform. that is X we're business one that was pleased with started consumer X So our ways. Then

$XX,XXX run client. that us. that's $XX,XXX the range for deposits This where brought quarter real that's see in And to alone, a nearly $XXX million. been we more in for And each home

Now platform we're internal try to going from shift going 'XX, platform. vendor forward into an for outside in to an to 'XX the

$XXX what the for charge we're his it Officer while and Chief That's run longer And regions but going Chief in 'XX in into we've with reimagine our there'll we came be that will over will going Banking in forget focus so was our as the role last us are moved more maintenance 'XX, to let's also reduce traditional Officer that it 'XX, help regions. we will the But rethink us Officer And take Lynne we've the is of be regions our why rethinking, then of Chief speed redesigning help up and own reduce, income. fee our more to regions. with Credit deposits. And Herndon they're this to Tim and in brought a not in platform. of But role. ball Tim's platforms That course, forward, some C&I, going reason X to deposits. And here, probably but come for been will also term, and And game we the expenses. And not quarter it well and why not least, grow out Credit that from and mention how regions. million as C&I to should that the is focused. the I the

pick into back that sell so twofer as deposits our bring help the XXXX. but we the a steam services then -- first, easier the we're up year will 'XX, income to the And going and new to will term. cross-sell be of continue fee management of get us end there towards to It long again, in some over treasury

And gives year and early, them 'XX. stages, in on either of other So sense we'll what go you 'XX that them to kind at and that back I of the probably doing. deposit to been some early hope verticals are this early have end of just looking hope work ready or a we've we're

Ebrahim Poonawala

around at not equation helpful. Ken. is part any where franchise, is the engine? That of hear in generating I M&A this didn't another deposit was, for bring retail change that up of pick kind And sort view all bank you of a does what Thanks doing today? your Or rundown, the

Kenneth Vecchione

So will billion. we But the We're frankly, today, point. into as bigger as to or we that of CETX, deposits, some M&A part do the a all. what kind we $XXX we We kind not at not play this come going play it's M&A point, will, to with continue think get of conversation But that's equation. we're and Again, the conversation -- about talking we're XX% premature of then at we're do move brought now bigger. talking about it question at upward. into approach

I think get before years of to couple we $XXX billion. still we have a

Operator

from comes Piper Clark of question next Sandler. Our Matthew

Matthew Clark

billion the thought talked a of Just growth I half. second had start maybe the in growth Is to year? loan a that first we $XXX the just in the some or loan in growth step-up second on million previously conservative guide acceleration you quarter. guide we about one a Or necessarily all expect being not half? the $X loan should the in in little

Kenneth Vecchione

million. QX, me going thought first, between be loan say, So $X growth and was let $XXX to we

economic And little a came about cautious so rather were as I'd trend. we a surprised still general at But on little a the upside it million. be we're in forward. activity be surprised going going that $XXX to

for CRE deemphasized And come, areas just of so showed obviously, residential, office we're have going to to then yet. advertised the X, has now, this slowdown being certain classes well. to mindful recession as is not sort asset always or but of name some be that construction those as we and up And

stay to with quarter. the think, look guide faster we we'll a loan $XXX growth. in million then reasonable. going the liquidity if just to we're And of We than deploy think in it comes so And that's

getting thoughtful we've loan liquidity problems safe, a As rule, growth. never deploying had sound general our and good, and

Matthew Clark

And and run million, I'm rate closer $XXX the that, at at you're million wrong. fee correct securities roughly you $XXX me if a look guide about, adjustments, to last guide, is million, the losses, off $XXX you talking run year's you midpoint base. fourth it, annualize your on call with make And fair the the when quarter then if income I value coming think exclude the rate, the Okay. up

might if me to year. So in there not that that assuming talked you if wrong And thinking mortgage. takes on any correct, it million. I'm just $XXX is And be if and maybe correct it of not about. X% this -- want about puts you're But get what we down implies I uptick but is obviously, the

Dale Gibbons

of going cover a undertaking. Well, We've that which -- of could of position noninterest in side, into the going charge we that so push all to of some kind and we're internal come the then necessarily decline more a implementing income now. a of also have We where think we're and on not rate clients their got kind ECRs kind puts up. down, things does revision that service credit that as earnings few on the be rates consumption a services, of

So we think in category, kind that. that growth going again, we're of to see that and looking for certainly, kind forward expect of

Matthew Clark

spot on the think of of the rate like way on beta Okay. us the there on And interest-bearing then is you the Can pressure kind year? last the update down me, seems it deposits. and just And specifically? how at end subsiding about the the on you interest-bearing for one

Dale Gibbons

deposit Yes. year-end. was rate Interest-bearing X.XX% spot at

down, coming the going strong. to In be think terms it's of we very beta

no slower they up. the betas certainly way than on down expect to were the on way We be

that, they. You -- so that watching our and entire faster recall are have this been than closely, of that may betas and norms we're our kind clients is that industry expecting are time, that

expect And the costs. are able the that pull on for well be I ECR-related, some down to So pull imputed be that have, that might them we're those funds. Fed as down to of yields effective going to those tied which interest-bearing

Operator

comes question Chris of next McGratty from KBW. Our

Christopher McGratty

Ken, balance the maybe on and sheet question capital. a

year? the you on in or about to bit not be door comments it. wanting the maybe getting in soon. appetite because talked back in XXth You of about the the growth open for of little going percentile so half buyback you Can a you're weren't terms pretty XX% be paid to for But at perspective

Kenneth Vecchione

no but Yes. know a us. a do target, we I little a have Right XX% plans call of we floor. for a it's And now, it is to floor more a of more buyback.

then that. we'll growth the us, enter well, front lot where in And So internal to to And lot we of we a to going decisions like have of as a that's to growth I we're want we have money. capital. deploy above see 'XX, build make. If of

is But XX% do buyback. to if the tell a you economic we're going to on again, table a got floor the been And has company. environment this us. in for I'll not is the tell and you me First, what really, the conversation buyback

Christopher McGratty

Okay.

the 'XX, capital. for growth accelerating the conversation? you'll XXXX that and for weigh nothing Is using between perhaps the alternatives fair So a but

Kenneth Vecchione

I a 'XX just 'XX, through no to told talking time you. about there's 'XX get of we lot year. could want buyback But spend everything you, for We tell on definitely and I make the table.

Christopher McGratty

Okay.

of sheet. In -- balance Dale, terms of terms the in

You ] [ targeting we in How mentioned absolute, the of How much the do Dale. this are how the will sheet of kind just go the a percent of about we bonds? think buying your do HQLA, the How balance securities? incremental odds quarter? you billion, in think bridging billion, $X -- to $X

Dale Gibbons

Yes.

ratably, from you you kind go mean to of we're just And the it excess if $X.X I deposits going that HQLA. in showing can growth impute guidance, billion, whereby this certainly to preponderance is in of loans. our of So did of

about first summer, As we that. of of end the to the was the think getting hurdle talked year, that be will that do going over earlier, half kind by we added of I

loans there HQLA between range a terms us billion So of that's we're about. rate that point deposits. in But more if too talking And and you just then growth at more take time, proportional would be numbers the of kind of maybe is that $X the that in would did, there.

Operator

comes question next Gizycki from Von Deutsche Bernard Our Bank. of

Bernard Von Gizycki

and deposit ECR you I expected know are Just on pricing a to decline question the costs noted dynamics. ECR-related volume. with rates

funds you in that pay lower range. I X% Fed believe others Just have deposits and the that rates, are some on in

does relationship? So a ECR before ECR beta, you XX-basis-point customers Or will then higher of rates deposits? cost for cut all through decline you to And to or them? need ECR cutting XXX% the get just additional flow regardless Xs rate that cuts get deposits lower the all with

Dale Gibbons

that Fed we really talked of to going initially of i.e., think the funds. are be beta preponderance The our those tied effective with to about, are those XXX%. And ECR you very near is that the type price deposits

the The a fully lower, probably We're the going after kind stutter I step But increase. second we will piece piece able of larger that, we significantly are I kind can it. to near think with can not But betas through. on XXX%. we where be put think be on first But that those trajectory to pass them to as necessarily well. to get it's rates or significantly of maybe piece, have maybe our at of be going lower, XX% rate

Bernard Von Gizycki

ones? the about balances, much not it the funds, ones for beta X. it paying And So I'm lower XXX% X once if you sure higher we give magnitude start you a Fed have the even or we are the they volumes getting balance? for or the the could cuts, if size between the those the between think is a though just like X%, smaller

Dale Gibbons

Yes.

approximately have terms some that what the of in of things number settlement see some going X/X going is So you're of services, the between you're our are of beta. HOA to to lending, an warehouse elevated deposits, probably

Bernard Von Gizycki

I if ask could one then just And Okay. more.

Just on your guidance. outlook

to think XX%. the us the underlying the what just and gets Just net give have difference X% about income, as assumptions Could Like we up you the up you just X? the interest you XX%? between

Kenneth Vecchione

The that's and bringing to in forward, move the that move And additional XX% on direction. management liquidity income what's in, loan that we is into a going placing as combination of we're us really growth the investments.

Dale Gibbons

like? the competitive does median. mix have tends the What what yield be Yes, might look curve little inverted, all for some or And that curve yield bit is like? how on a be pricing look don't that's it remains to of the look changing if of does around into a to items? lot hence, parameters a I better going We probably loans. what that might be, mean these that number insight flat commercial those more

Operator

Ben question of comes next Gerlinger from Citi. Our

Benjamin Gerlinger

seems a on just nature, nuance the like more I curious it lending like down said. Just in linked-quarter had touch a be technicality, obviously were technical of every loan seems bit maybe if you just almost why? on I base but question. of was category. yields a kind Might It can

Dale Gibbons

Yes.

was So versus held-for-sale I happened did on investments. from in the the did of a we just day before third the last talk what about loans or held-for-sale a It quarter. that, investment, done on whereby to little really bit transfer

number, forward. the we year. going also there of elevated We increase. relative back $X.X while been in rolling pricing or probably those is But revisions looking some this we're mix have X that's that We're spreads to of of affect ago. yields on billion on the are their the have to repricing still originated ratable in a XX% average the fixed dropped those side, some at still piece loans So seeing And more opportunity elements. years that on degree. will that, rate, about were kind loan that that talked when about even There's variable X

Benjamin Gerlinger

that's you. Got good. No,

the forward of like bank had back and your back calling you a about clients, because the a seeing too of spreads do today. especially competitive available thinking billion certain I So less different they a would kind of you the the available the less in pricing market. more year. seeing mean, are seeing it's in the yields have of lending not many I'm typically or best going there's half is just solid I being Like market you're kind bigger was so couple categories. because you're in shots $XXX-plus cuts Are -- done rate banks? and lenders spreads because from better of just stepping seems the question next lot bank it in the the Or it

Kenneth Vecchione

Yes. It's just things market-by-market dependent. are markets on in different us. There going for almost

there's less you're they're competitive deal because tech there. innovation, less If there talking a moved, raising and flow cash but spreads more really haven't little because

lot deals, and our banking spreads you're some specific were getting pricing. If very we strong talking are

out. banks are or to, It's one some moving back of all these well, in are moving generic as really give and they And hard to pulling not. answer

Benjamin Gerlinger

Got you.

a just The you Or Then you get more you moment public kind once capital. of you is XX% going you more agency, announcement guys? the operate agreed a credit from said in is to credit in. just a we XX%, the of one is more XX% bit what It I the If it you Okay. get event forward seems of could rating also upon? a kind rating. And hit referenced for floor you sneak a like that catalyst autonomously? is guys bit

Kenneth Vecchione

us. I for as is, XX% the floor a Well, said,

you a and on We to positive rating That's the the usually make put X-step and change. have usually continue engage outlook They back or agencies. with to come engage process. then

our if Fitch, As from don't far a as far, know bank there's outlook got any in in I know I we but other their outlook. that change had a so change

trigger. that's to capital in our the business. And more the with in very They the But there, in quality friends to rating. meantime, strong group my how we're we a bring company. In firm, asset at and good agencies levels, great slow positioning be the go and we when rating there go steady, pull So an liquidity. to could with corporate want little operating a just in bringing may still trust the is investment business upgrade stable

would just fine. they're their business. bring opportunities just This doing more So in accelerate to

Benjamin Gerlinger

Got you.

Okay. I appreciate it.

XX% You'd probably time the that the by at be get time, you But announcement. guys. I appreciate

Operator

of comes from UBS. next Brody Our Preston question

Broderick Preston

if for loan follow just end Dale, hoping, HFI. from the the But the spot the loan was up to rate provide move portfolio HFS was I at of what could I yields. understand to the quarter? the I the you wanted on

Dale Gibbons

Yes, X.XX%.

Broderick Preston

BTFP I not to a BTFP. the sense off was for What paying also better Okay. the the behind borrowings. wanted rationale more but expensive get

the was the versus X.XX% on borrowing of short-term the rate in to XQ the XX-Q, thought this X.XX% time there. I BTFP better average think your think understand rate the I last I quarter. just process wanted

Dale Gibbons

thought just don't we Federal need -- Reserve. to we didn't frankly, We be the from borrowing

last that cost. It acquired going March it's you something at in did was we we mature This of to was a agree and so with And year, that. it I a had is XX-month anyway. deal. modest

it a XXXX to just was we'll thought it we was leave and it But relative months the what of we it have been. situation would behind -- couple part early of in XXXX. So

Broderick Preston

I just on the clarify to Got it. ECR-related deposits. wanted

says at quarter the you $XX.X got billion But think of billion $XX.X I slide ECR you have deposits about end. NIB. of

deposits gets ECR-related the of that's also interest-bearing component another there but is compensated ECR? So through still technically

Dale Gibbons

Yes, correct.

interest and depending gets whereby could ECR the on of is, is, gets have type the manager So happen client it what owner the income. situation a the what we will

an an situation itself. those claim it's on noninterest-bearing liability expense So commonly, are mortgage the on because dual see rate really HOA aggregator have dollars That But that on of you really in earnings not deposits. is the warehouse a owned because don't are enterprise. and to simply us most that deposits by get no whereby that HOA, the that example, the credit for interest they

that that's So doubled why up.

Broderick Preston

the the the understand this you just the Got correspondent Dale. to year, last the past course mark that at you moving a to bit, on Capitalize margin moved I on there. at put higher had then on impact higher throughout it. production? this wanted it a -- parts Did the And when maybe you'd it MSRs rate? gain you quarter? have And and want you a MSR against was and MSR loss to loss. understand the the did did on all and sold just of take then question mechanics sale little rates I I the just maybe a

Dale Gibbons

happened. I no, No, I around say no, of I think wouldn't that. mean, -- it volatility was kind the what

up CPRs to business were the prepayment So refis from I mean, that is again, they ever or around. we a little catch-up and And low. whatever picked seen, that maybe has of saw constant been I've CPRs rates when it But that bit rates jumped, X% I slowest delayed. like had to maybe was and fell, a been in then decline think the of exceptionally and rate, somebody X%

our value on picked hedge we loss something servicing low terms of that the gain quarter, CPR, was because ever, change the in fell in we of and result rights lowest the the had $XX we million between in maybe a what rapid so the more by we hedge. a that And normalized. result as terms $XXX And very to velocity was of were up shy of valuation. million a the those in a such of of fourth gain fell the was that And short that, had

Kenneth Vecchione

value in just to us that within end firms at appropriate and that outsized the basis sure the XX to range. treasury make MSR Dale's XX-year by Brody, have you MSR we're look remind we and it I'd points, of that, the X.XX%, QX, -- punctuate dropped these for valuation point. balance, the from X.XX% that come several And

Operator

of Terrell comes question Our from Andrew next Stephens.

Andrew Terrell

if Dale, I hear I comments being just upside start guide. could around not there kind -- of captured on banking your potential go-forward the the mortgage the and

seeing end with on would to just remind the business? upside and over we Just efficiency to can And a turn the the fluctuate time, of extent fees? do front the that kind us better maybe fee expenses does of market you incremental the give in in income just mortgage up the how us sense lift

Dale Gibbons

Yes. were in that they came And acquired low to I mean XXs, the us stand-alone kind about kind a of so the them, and we when took mid-XXs. they when running they enterprise, were and in, were we XX%. of at

today. think that's intact basically I

higher So the the marginal lower banks with the they're of of now risk to related yes, the overall infrastructure so invested -- elements yields of has it's pretty building in efficiencies, and rate frankly, as investment this close some bank HQLA. of to and cost technology management

at comparable are ratios our about now, XX%. efficiency So right

Andrew Terrell

Have is basis, Or on looking the just then It versus ticked cost And product of of deposit deposits. it. a balance I you this few on if rates more a function the deposit compare lowered anywhere appreciate points line on I at this down cost the the basis costs already? Okay. the quarter, disclosed quarter. like mix average percentage ECR expense of expense quarter? that looks a this

Dale Gibbons

lowered if X to clients and been but has rates. we And make what a of maybe options. to your have is bit said, funds -- minus." given and "Look, going going X But some it little do them have spread we're effective going today, relative haven't one-off Fed later, this happen we done we've little is say, to perhaps you're to, a something We

the to maybe to a rate you If we'll now, take -- one first get. you cut skip want

down those of through this. basically So we're pushing a on individually we kind as go

are we picking So now. that up

February. going I January, to think that's continue into

Andrew Terrell

attrition see conversations? you And there color those any is Or a did of any there? result as

Dale Gibbons

alternatives input for elsewhere. hasn't an And there of is us what to attrition. been terms pricing our relative I in So that's any like point think

cycle, what fever where institutions on that might invested the move opportunity treasury, of think is it to. fallen into move financial the either the is what that other is in thing maybe opportunity rate able to and have to sheet sequentially, ease to us And and helped these is we in they see it and, that, attrition like in certainly, has some means off give to to some into or and or starting what the case negotiations. well, be an to off-balance all And kind I broken of in how what terms point. situation asking those doing of up. for I migrate one-off we're to degree, do we'll in we're okay, run that we're important these like, think We of that's some then many them we're for, a terms

Operator

comes next from Our Autonomous. Smith David question of

David Smith

I in NIM you wanted floor or for middle a normalized saying comments to circle a NIM should the X.X% be to earlier typical rate that Are the range cycle? in back those more call.

Dale Gibbons

over of beforehand, the -- back Well, was that. a that head we number getting might was see conversation time. where don't in I that an extended to kind of of kind And

of level extended feel we're maybe expectation might that's So be. I kind kind where mean like I do an now. an approaching of equilibrium of we

we're not isn't is that... But -- that terms in number do that that. where XXXX. not I'm X.X% far the of so headed kind in of from think And guidance We our

Sorry, go on. head. David go

David Smith

Yes.

high-teens guide, X% X% the going nothing if ROTCE, with RWA growth a on and year. your loan this think you're NIM, capital, something doing So growth only else to or talking I like that keep there's about implies

should with a seems where ton I just starts to floor, XX% growth? to you CETX generated excess being a is a XX% it that starts buyback? but soon. you're and to loan ratings, to change So even level know make is reach excessive? just regardless a pretty that being turn just measured in And capital of imply of you on there the If still sense think get

Dale Gibbons

think climb we Look, I it above introduces XX%, optionality. as

could we're there the last You But up of kind -- There balance in to part there we'll it. multiple now. be can few be that think of be things and by liquidity. the for, we're on want our summertime, just terms for an again, could be of one capital profile we with transaction. cleaning I not that looking that it's right things again, the M&A could sheet. we're, build then done change And And

David Smith

on lastly, share a to And how indexed deposits as of terms opposed it. to the pricing? of much rate interest-bearing deposits. Got the bank of discretion in you some Can are having level at

Dale Gibbons

costs, look can of at see you relative not is mean, if -- a the as mean been elements our kind large interest-bearing about. of so deposit that, we've some that I you Well, talking I of component to ECR

less some beta, is ECR piece. higher but there that than a So little on is bit significant is the it

Operator

comes question we Wells have currently Our Tim this from time, At disconnected. Braziler no questions. next of further has Fargo. Tim

Vecchione remarks. back further any I'll So for hand to Ken

Kenneth Vecchione

about much joining you very look we in a thank again. Thanks today, months from and you forward us couple XXXX for Well, talking to now. of to

Operator

Thank you call. for today's joining

your You may now disconnect lines.

Western Alliance Bancorporation (WAL) 26 Jan 242023 Q4 Earnings call transcript